A Do-It-Yourself Giant Does It to Workers

Amid double-digit joblessness, two top U.S. corporations cut still another mega merger deal that enriches execs and tosses workers, by the thousands, out onto the street.

You don’t have to be a high-flyer in high finance to get a kick — and a fortune — out of wheeling and dealing. Greed and grasping, we need to remind ourselves every so often,are still thriving right down on the ground, in America’s oh-so pedestrian manufacturing sector.

The latest case in point: the just-announced $4.5 billion merger deal that will fold the 99-year-old Black & Decker tool-making powerhouse — the folks who brought us the world’s first pistol-grip power drill — into its chief tool-making rival, Connecticut’s Stanley Works.

Heaven for who? Not consumers. The new “Stanley Black & Decker” may soon have enough marketplace dominance, says Morningstar business analyst Anthony Dayrit, “to raise prices” on do-it-yourself gizmos that range from from power tools to window locks.

And workers won’t find much heaven in the merger either. Black & Decker and Stanley together currently employ a workforce just over 40,000. The merger the two companies announced last week will eventually cost an estimated 10 percent of those workers their jobs, starting with staff at the Black & Decker headquarters just outside Baltimore.

No surprise there. In any big-time merger, at least some employees will always become “redundant.” A newly merged company, after all, doesn’t need two sets of headquarters staff.

But redundancies, after a big-time merger, never seem to show up in executive suites. Top execs at firms getting swallowed up either get cushy positions in the new firm or golden parachutes that ensure them a gentle landing when they leap out into the cold hard world.

Black & Decker CEO Nolan Archibald had to choose between the two. By contract, Archibald could have walked away from the new Stanley Black & Decker with a severance package worth $20.5 million.

Archibald has chosen instead to stay on as the new company’s “executive chairman” for the next three years. The 66-year-old won’t have to do much heavy lifting in this new slot, except to cart his ample paychecks to the bank.

How ample? For attending board meetings and “advising” — and playing no role whatsoever in the new company’s day-to-day management — Archibald will collect a $1.5 million annual salary. He’ll also pocket a $35.5 million pension and another $15.7 million from his Black & Decker supplemental retirement plan.

On top of all that, the Associated Press reported last week, Archibald may grab as much as $45 million in bonus “if cost savings goals are met in three years.”

Meeting those goals shouldn’t be too difficult. Archibald and Stanley CEO John Lundgren have plenty of experience cutting costs. They know the secret. They just slice away at jobs and wages.

Stanley CEO Lundgren, for his part, took home only $4.6 million in 2008. Last December, Stanley took steps to pump up that disappointing take-home — by closing three manufacturing facilities and axing 2,000 jobs.

Wall Street cheered that move. And Wall Street is also cheering Stanley’s takeover of Black & Decker. For good reason. The deal will mean a quick 22 percent profit for Black & Decker shareholders. The investment banks that shepherded the merger deal along — Goldman Sachs for Stanley, JPMorgan for Black & Decker — stand to do even better.

Investment bankers typicallycream off fees that equal at least 0.1 percent of a merger deal’s total value. On multi-billion-dollar deals, these fractional percents can add up fast.

So far in 2009, not counting last week’s blockbuster Stanley-Black & Decker action, JPMorgan has pulled in $1.26 billion advising clients on 156 merger-and-acquisition deals. Goldman Sachs has grabbed $1.22 billion, over the same time span, on 142 deals.

Where do all these billions in fee revenue go? Roughly half the revenue investment banks make from merger deals traditionally goes straight into banker bonus pools.

Into the communities these mergers devastate, a top U.S. labor leader charged late last month, goes nothing.

“Too often,” says United Steelworkers president Leo Gerard, “we’ve seen Wall Street hollow out companies by draining their cash and assets and hollow out communities by shedding jobs and shuttering plants.”

Gerard’s union has just announced a merger “deal” of its own — to help put an end to that hemorrhaging of jobs and futures. The Steelworkers will be joining with the Spanish-based Mondragón International, the world’s largest network of industrial worker cooperatives, in a bid to “transform manufacturing practices in North America.”

“We need a new business model,” Gerard explains, “that invests in workers and invests in communities.”

Mondragón may just fit that bill. The Mondragón network, launched 53 years ago by a visionary Basque priest, has become Spain’s seventh-largest business group and currently operates 260 enterprises in over 40 countries — making everything from high-tech tools to refrigerators.

Workers in Mondragón cooperatives own their enterprises. They each have an equal share and an equal vote in key enterprise policy decisions. Workers in Mondragón businesses, notes long-time progressive analyst Carl Davidson, “themselves decide on the income spread between the lowest-paid worker and the highest-paid manager.”

That spread, across the Mondragón universe, averages 4.5 times. In the United States last year, CEOs averaged 319 times the pay of average U.S. workers.

The United Steelworkers, the biggest union of manufacturing workers in the United States, will now be looking to apply Mondragón principles to “viable small businesses in appropriate sectors where the current owners are interested in cashing out.”

“We see Mondragón’s cooperative model with ‘one worker, one vote’ ownership,” says Steelworkers president Gerard, “as a means to re-empower workers and make business accountable to Main Street instead of Wall Street.”

For thousands of workers at Black & Decker, and millions of consumers, that accountability may come a little too late.